Social broadband goals risk being undermined

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Lyndsey Burton, chief executive of UK consumer price comparison site Picking outargues that without foresight and determination on the part of the UK Government for broader system-wide change, broadband will continue to be unaffordable for many and those who need it most will remain disconnected.

Objectives of social broadband

The escalating cost of living crisis in the UK is increasing pressure on the broadband industry to ensure people don’t go offline as household finances are stretched beyond their limits . Social tariffs were originally designed to ensure that the service is made accessible to all by providing an affordable option for people on low incomes. Yet the current approach to social broadband pricing by the government and Ofcom creates confusion about what social pricing is and its purpose. For example, while telephony has been subject to a universal service regulatory obligation since 2003, the government continues to move away from digital by allowing social broadband to remain provided voluntarily by the market.

Relying solely on the market to provide affordable fares, pricing is limited by what private companies can achieve, such as BT underline when they said they “offer BT Home Essentials at cost” so they couldn’t make it cheaper. Ofcom own research has already pointed out that a fair and arguably affordable price for those on the lowest incomes on Universal Credit (the main social rate eligibility benefit) is around £4-7 a month. Yet despite this, social broadband prices are typically set around £15 to £20 per month, which makes them far from accessible.

This restrained market pricing leads to social pricing becoming simply a tool for retention services to offer existing customers struggling to pay their current fare a slightly cheaper option. While this undoubtedly fills a need, it fails to account for those on the lowest incomes who cannot afford broadband even at cost.

Questions are also being raised about whether existing eligibility criteria exclude people with affordability problems from social tariffs designed to help them. While social broadband tariffs have so far only been made available to those on means-tested allowances, Community Fibre, a London-based comprehensive fiber provider, has moved away typical eligibility criteria when he made his essential £12.50 fare available to anyone who needs it financially, arguing that they “think it is wrong to be forced to prove their eligibility”.

The initial objectives of social broadband as set out in the Directive 2002/22/EC (now part of the Communications Act 2003), make it clear that the aim of social tariffs is to ensure affordability for all, taking into account both economic conditions and individual household expenditure. It is not designed, as it appears to have become, to exclude people from the lowest income groups on the basis of affordability (or even eligibility), because market-level funding correct is either unachievable, unsustainable, or both.

It seems clear that social broadband tariffs require public funding and that otherwise broadband remains out of reach for those who need it most. And what is most concerning is that by letting this continue, we could see the creation of a public perception that broadband is simply not for the poorest in society.

The universal service must guarantee autonomy

During certain periods of the Covid-19 pandemic, we have seen mobile providers offering free data boosts, as well as zero ratings of certain websites like the NHS. The Good Things Foundation National database also offers free mobile data through community partnerships, which they themselves describe as “like a ‘food bank’ but for internet connectivity data”.

These initiatives are undoubtedly extremely useful as short-term solutions, especially for people at risk of financial exclusion, and should continue to be disseminated more widely. However, in terms of Internet access as a universal service, mobile donations should not become a long-term stopgap solution that would allow home broadband to remain unaffordable for the poorest households.

It is essential that people on the lowest incomes are not excluded from access to broadband at home simply because the current market financing mechanism does not allow tariffs to be sufficiently accessible (read: cheap) .

Everyone deserves the autonomy of a decent home broadband connection, allowing them to fully participate in a digital society and carry out their daily lives unhindered. Children should be able to do school homework on a computer without having to share and struggle with a mobile device, as was usually the case reported during home schooling periods of Covid lockdowns. Hopefully this will be appreciated by the new Secretary of State for Digital, Culture, Media and Sport, with her vast experience in the field of education.

Solve digital exclusion

Consumer groups and ISPs are increasingly calling for broadband to be reclassified as an essential service under the VAT system. This would lead to a reduction in VAT from 20 to 5%. However, although at first glance it seems financially advantageous for consumers, there are some problems with this suggestion.

Broadband prices are generally very competitive, with several offers costing under £20 per month, which means that the “affordable” social tariffs are already about the same price as the cheapest packages to switch customers. A general reduction in VAT on broadband is therefore likely to be a waste of government revenue and is likely to be largely absorbed by providers.

Alternatively, limiting the VAT reduction to social tariffs alone could be an effective short-term way to reduce the cost of social tariffs, especially if the reduction is zero-rated. However, questions have already been raised about how this could be implemented practically by HMRC and ISPs. And I would say that a reduction of 15% or even 20% in the price of social tariffs is below what is necessary.

There is also a risk that reducing VAT on broadband as a stand-alone solution will undermine the ability to introduce a social levy on bills in the future, in the same way the energy market works, because it could then be argued that it would unfairly burden existing customers and risk increasing inflation. And like Marc Allera, CEO of BT Consumer said“Funding or subsidies from social tariffs could make a very significant difference, in the same way that winter fuel payments help vulnerable people with their energy expenses.”

Redefining broadband as an essential service, in line with other public services, must therefore be done holistically and not with piecemeal solutions. The simultaneous reduction of VAT and the introduction of a social levy on invoices – as I have proposed here – would allow social tariffs to be financed by the state, while the reduction in VAT could be used to offset any charge on existing customer bills and mitigate any impact on inflation. This might be the simplest and most direct approach to solving digital poverty.

Combining the VAT reduction with a fund dedicated to digital inclusion, as I originally proposed, has the advantage of reflecting both the cost of providing broadband and inflation. It would also protect it from future budget cuts which could lead to further underfunding of digital inclusion initiatives in the future, and if the government wants to push back the adoption of the social tariffs of the current 1.2%protected funding is important.

However, if a ring-fenced fund attracts little appetite due to its resemblance to a tax mortgage (despite the UK now have one), a simpler approach might be to implement the changes simultaneously, but separately. This would allow the VAT reduction to offset the implementation of a levy social, protecting both existing customers and inflation, while providing the flexibility for the levy social element to be reduced at the same time. future as digital exclusion is addressed. It is therefore no more a mortgaged tax than the social levy and the 5% VAT rate that exist on the energy market.

Broadband for all

While many broadband providers are going above and beyond to help alleviate digital poverty, the government’s approach of leaving the provision of social broadband as voluntary has become obsolete, as broadband is now arguably as essential as a home phone line. Regulating social broadband prices would both create consistency in the market and secure the basis for public funding, allowing them to be low enough to guarantee connectivity to those they are meant to reach.

We must ensure that universal service objectives are met and that everybody has affordable home Internet access. To continue to expect a free market to fulfill this purpose is to continue to exclude people and children from participation; benefiting from; and achieve in our digital society.

This article reflects the views of the author and not those of the [email protected] blog nor those of the London School of Economics and Political Science.

The featured image: picture by Compare Fiber on Unsplash

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